Minnesota affiliates get back to business with Amazon

After being kicked out of Amazon's affiliate program more than a year ago, Minnesota bloggers and deal site operators appear to be back in business with the largest online retailer in the United States.

The reversal came on Wednesday, the same day Amazon.com Inc. began collecting sales taxes on online orders in the state for the first time. In doing so, Minnesota became the 22nd state where Amazon collects sales taxes.

A number of bloggers and mom-and-pop entrepreneurs said they were able to set up affiliate accounts in order to resume receiving commissions for sales they direct to Amazon through ads or links on their websites. Some Minnesotans had depended on that arrangement to make a living.

"When you try to open a brand new account, it no longer blocks you if you're from Minnesota," said Aaron Hall, a Minneapolis attorney who runs a blog for law school students on the side.

Amazon severed links with Minnesota bloggers in June 2013, as it had done in several other states, in order to avoid being forced to collect sales taxes in the state.

Online retailers typically only have to collect sales taxes if they have a physical presence in a state, such as a fulfillment center or office. But last year, Minnesota lawmakers expanded what constitutes a physical presence in a state to include affiliate programs. It's a move other states have made as well in order to bring in more revenue and to help level the playing field with brick-and-mortar retailers.

At the time, the trade group Performance Marketing Association said there were 5,200 affiliate online marketers in Minnesota for Amazon and other websites who earned about $500 million in 2012 and paid $35 million in state income tax.

The state Department of Revenue does not have an estimate for how much in sales tax Minnesota stands to gain from Amazon.

But soon after Amazon disclosed its plans to collect taxes here, Hall noted that the company updated the operating agreement for its affiliate program to remove Minnesota from the list of states in which affiliates cannot reside.

Minnesota website operators said they couldn't reactivate their old Amazon affiliate accounts but were able to open new ones.

"I'm very excited that they are reinstating the program," said Kirk Schneider, an independent industrial design contractor in Chaska who also runs a host of product comparison websites. "Over the next two or three months, I will spend a lot of time going back into some of these sites I had developed and get them back up to speed."

He has kept those websites running in the last year, but hasn't received any revenue from them since Amazon cut its ties to Minnesota affiliates.

Todd Mikkelsen, an Austin blogger and author who writes about parachute cords, also welcomed the development. At one point, commissions from Amazon sales made up about half of his income. But after that source was cut off, he began building up his following on YouTube and has recently been generating some revenue from ads.

"It's starting to chip into what I was" making through Amazon, he said.

Others found different ways to adapt. Hall, the attorney, began using a Texas aunt's affiliate account for links and ads on his site. He said he has been letting her keep the commission, which usually amounted to a couple hundred of dollars a month. But now he will begin using his own account for ads.

Amazon has been vague about how it is expanding into Minnesota, fueling speculation that it may be building a distribution center or one of the retailer's smaller new "sortation" centers.

Last week, it registered Amazon Web Services, its cloud computing arm, and Amazon Digital Services with the Minnesota Department of Revenue in order to get a state tax ID. But Ryan Brown, a Revenue Department spokesman, said Amazon has since then also registered two more entities — Amazon Services and Amazon.com — with the state. So its immediate plans remain murky.

These days, more than half of all Amazon sales are now subject to sales tax.

The company also announced it will close a distribution center in Coffeyville, Kan., in February.